SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
SCHEDULE 14D-1/A
(Amendment No. 2)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
-------------------------
COLUMBIA ENERGY GROUP
(Name of Subject Company)
CEG ACQUISITION CORP.
NISOURCE INC.
(Bidders)
COMMON STOCK, $.01 PER SHARE
(Title of Class of Securities)
197648108
(CUSIP Number of Class of Securities)
Stephen P. Adik
Senior Executive Vice President,
Chief Financial Officer And Treasurer
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
(219) 853-5200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Bidder)
-----------------------------
COPIES TO:
Peter V. Fazio, Jr., Esq. Alan G. Schwartz, Esq.
Schiff Hardin & Waite Simpson Thacher & Bartlett
6600 Sears Tower 425 Lexington Avenue
Chicago, Illinois 60606 New York, New York 10017
Telephone: (312) 258-5500 Telephone: (212) 455-2000
=================================================
This Amendment No. 2 (this "Amendment") amends and supplements
the Tender Offer Statement on Schedule 14D-1, as amended, originally
filed with the Securities and Exchange Commission on June 25, 1999
(the "Schedule 14D-1") by CEG Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of NiSource
Inc., an Indiana corporation ("Parent"). The Schedule 14D-1 and this
Amendment relate to a tender offer by the Offeror to purchase all of
the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Columbia Energy Group, a Delaware corporation (the
"Company"), at a purchase price of $68 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 25, 1999
(the "Offer to Purchase"), and in the related Letter of Transmittal
(which, as either may be amended or supplemented from time to time,
collectively constitute the "Offer"), copies of which are filed with
the Schedule 14D-1 as Exhibits (a)(1) and (a)(2), respectively.
2
Item 10. Additional Information.
On July 2, 1999, Parent issued i) the "NiSource/Columbia StraightTalk"
communication to stockholders of the Company, and ii) the form of
letter from Gary L. Neale, Chairman, President and Chief Executive
Oficer of Parent, to directors of the Company, which are included
herein as Exhibits (a)(11) and (a)(12), respectively, and incorporated
herein by reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated June 25, 1999.*
(a)(2) Letter of Transmittal.*
(a)(3) Letter dated June 25, 1999, from Dealer Manager to
brokers, dealers, commercial banks, trust
companies and other nominees.*
(a)(4) Letter dated June 25, 1999, to be sent by brokers,
dealers, commercial banks, trust companies and
other nominees to their clients.*
(a)(5) Notice of Guaranteed Delivery.*
(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.*
(a)(7) Form of Summary Advertisement, dated June 25,
1999.*
(a)(8) Press Release issued by Parent on June 24, 1999.*
(a)(9) Form of letter dated June 28, 1999 from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to investors of the Company.*
(a)(10) Press Release issued by Parent on June 28, 1999.*
(a)(11) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on
July 2, 1999.
(a)(12) Form of letter dated July 2, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to directors fo the Company.
(b)(1) Commitment Letter dated June 23, 1999 to Parent
from Credit Suisse First Boston and Barclays Bank
PLC.*
(c) Not Applicable.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
3
(g)(1) Complaint in NiSource Inc. and CEG Acquisition
Corp. vs. Columbia Energy Group et al., Delaware
Chancery Court, New Castle County.*
(g)(2) Complaint in NiSource Inc. and CEG Acquisition
Corp. vs. Columbia Energy Group et al., United
States District Court, District of Delaware.*
_______________
*Previously filed.
4
SIGNATURE
After due inquiry and to the best of its knowledge and belief,
each of the undersigned certifies that the information set forth in
this statement is true, complete and correct.
CEG ACQUISITION CORP.
By: /s/ Gary L. Neale
----------------------------
Name: Gary L. Neale
Title: President
NISOURCE INC.
By: /s/ Gary L. Neale
----------------------------
Name: Gary L. Neale
Title: Chief Executive Officer
Date: July 2, 1999
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
11(a)(1) Offer to Purchase, dated June 25, 1999.*
11(a)(2) Letter of Transmittal.*
11(a)(3) Letter dated June 25, 1999, from Credit Suisse First
Boston Corporation to brokers, dealers, commercial
banks, trust companies and other nominees.*
11(a)(4) Letter dated June 25, 1999, to be sent by brokers,
dealers, commercial banks, trust companies and other
nominees to their clients.*
11(a)(5) Notice of Guaranteed Delivery.*
11(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9*.
11(a)(7) Form of Summary Advertisement, dated June 25, 1999.*
11(a)(8) Press Release issued by Parent on June 24, 1999.*
11(a)(9) Form of letter dated June 28, 1999 from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to investors of the Company.*
11(a)(10) Press Release issued by Parent on June 28, 1999.*
11(a)(11) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on July 2,
1999.
11(a)(12) Form of letter dated July 2, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to directors fo the Company.
11(b)(1) Commitment Letter dated June 23, 1999 to Parent from
Credit Suisse First Boston and Barclays Bank PLC.*
11(g)(1) Complaint in NiSource Inc. and CEG Acquisition Corp.
vs. Columbia Energy Group et al., Delaware Chancery
Court, New Castle County.*
11(g)(2) Complaint in NiSource Inc. and CEG Acquisition Corp.
vs. Columbia Energy Group et al., United States
District Court, District of Delaware.*
_________________
*Previously filed.
EXHIBIT 11(a)(11)
-----------------
NISOURCE/COLUMBIA
STRAIGHTTALK July 2, 1999
[Photo of Gary L. Neale]
DEAR COLUMBIA SHAREHOLDER:
We're delighted by the ongoing support we've received from
Columbia shareholders since making our offer public. We believe it's
useful to provide you with accurate and timely information to help you
get the value you deserve.
"StraightTalk" is our newsletter to you, the Columbia
shareholder, about our offer. In this issue, we share information
about the pricing and leverage involved in our proposal.
You'll see comparables that indicate that our $68 per share cash
offer is a good starting point from which to begin our negotiations.
There is more money the question is whether we spend it pursuing
this transaction or give it to shareholders.
You'll also see statements from the rating agencies that document
the investment grade rating of the combined company following
completion of the transaction.
The best way for you to encourage Columbia to sit down and
negotiate is to tender your shares immediately. Tendering now is a no-
cost, no-risk, fully reversible way to encourage Columbia board
members to fulfill their fiduciary duties.
I encourage you to communicate both with me and directly with
Columbia directors and management your thoughts on our proposal. I can
be reached at (219) 647-6005.
Please help us to help you create shareholder value by tendering
your shares now.
Regards,
Gary Neale
Chairman, President and Chief Executive Officer
NiSource Inc.
7
AGENCIES TO NISOURCE:
CREDIT RATING REMAINS STRONG
Three credit-rating agencies have affirmed NiSource's strong
investment-grade rating following a combination with Columbia Energy
Group.
The numbers also show that the pro forma capital structure of
the combined company will be well in line with the industry average.
Certainly, Standard & Poor's has no trouble with NiSource's
transaction. Writing on June 7, S&P noted that it "expects that the
corporate credit ratings of NIPSCO (Northern Indiana Public Service
Company) and affiliates will fall no more than one notch." S&P also
said it "expects to raise the ratings of Columbia Energy at least one
notch" in light of NIPSCO's strong credit rating.
Moody's was also positive, confirming the debt ratings of NIPSCO
and the commercial paper rating of NiSource Capital Markets. While
putting the parent company's and long-term ratings of NiSource Capital
Markets under review for possible downgrade, Moody's said that pro
forma coverage ratios are typically lower for gas distribution
companies than for predominantly electric companies.
Moody's then noted that NiSource's pro forma coverage ratio would be
"closer to the average" of other gas distribution companies rated
Baal.
And, in its release of June 7, Duff & Phelps Credit Rating Co.
reaffirmed NiSource Capital Markets' and NIPSCO's credit ratings.
In its press release commenting on the strategic rationale of
NiSource's offer, S&P said that it "views the acquisition of Columbia
Energy as a very significant step for NiSource, but consistent with
the company's previously stated low-risk principal business strategy
of commodity (gas, electric and water) distribution.
"This distribution strategy has been reflected in the company's
acquisition during the past two years of two small regulated
utilities, Bay State Gas Co. and Indianapolis Water Co. This contrasts
with the strategy of Columbia Energy, which is focusing increasingly
on unregulated activities such as energy marketing and investments in
merchant electric generating plants to spur growth," S&P said.
NISOURCE OFFER STACKS UP TO
20 SIMILAR DEALS
NiSource's $68 all-cash offer for Columbia Energy Group is 10.7
times and 15.8 times last twelve months EBITDA and EBIT, comparable to
the mean of 9.5 times and 15 times paid in 20 comparable transactions
completed since April 1996, including Dominion Resources' acquisition
of Consolidated Natural Gas.
Furthermore, NiSource's 35.3 percent premium to the average
closing price for the four weeks preceding the announcement compares
to a 39.5 percent average premium for the 20 comparable deals.
8
NiSource is proposing to pay 23.4 times last 12 months earnings
and 2.7 times year-end book, compared to the mean of 24.2 times and
2.4 times for the comparable deals.
"We believe our offer is fair compared to similar transactions, and
it's worth noting that, looking at the multiples, Columbia's offer for
Consolidated Natural Gas three months ago was similar," said Gary
Neale, NiSource chairman, president and chief executive officer.
"Of course, we're willing to pay more, but we don't want to bid
against ourselves. We need to meet Columbia's team across the table
and discuss how we can better our offer," Neale said.
Details on the NiSource and comparable transactions are
presented below
<TABLE>
<CAPTION>
NiSource/Columbia Merger
Transmission & Distribution Transactions
- ----------------------------------------
(Dollars in millions, except price per share) Premiums Paid to Purchase Price Multiples of:
Pre-Announcement
Price Last Twelve Months
Date Purchase --------------------- ------------------------------
Announced Acquiror Target Price 4wks 1wk 1day Earnings Book EBITDA EBIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
_________________________________________________________________________________________________________________________________
Proposed NiSource Inc. Columbia Energy Group $7,940 35.3% 27.1% 22.0% 23.4x 2.7x 10.7x 15.8x
_________________________________________________________________________________________________________________________________
6/30/99 Energy East CTG Resources $544 52.2% 24.5% 15.1% 21.8x 2.6x 8.4x 12.4x
6/28/99 Wisconsin Energy WICOR $1,444 23.5% 29.2% 18.6% 24.6x 2.6x 9.9x 15.7x
6/15/99 Northeast Utilities Yankee Energy Systems $671 44.5% 40.6% 38.5% 28.5x 2.6x 10.5x 15.6x
5/10/99 Dominion Resources(1) Consolidated Natural Gas(1) $8,406 27.3% 29.2% 18.4% 22.6x 2.7x 10.3x 16.9x
4/26/99 ONEOK Southwest Gas $1,832 32.2% 21.5% 23.1% 19.1x 1.9x 7.5x 11.9x
4/23/99 Connecticut Energy Energy East $608 65.1% 50.0% 34.1% 23.0x 2.4x 11.1x 16.8x
3/15/99 El Paso Natural Gas Sonat Inc. $5,874 39.5% 41.9% 18.9% 32.8x 3.0x 9.2x 20.5x
2/22/99 Sempra Energy(2) KN Energy(2) $5,674 21.6% 28.6% 18.3% 31.3x 1.4x 11.6x 15.0x
12/14/98 National Grid Pic New England Electric System $4,600 26.8% 23.9% 25.0% 26.7x 2.0x 9.7x 13.1x
12/7/98 BEC Energy Commonwealth Energy System $1,567 16.1% 14.5% 16.6% 18.2x 2.1x 8.2x 12.9x
11/11/98 Carolina Power & Light North Carolina Natural Gas Corp. $426 47.8% 41.1% 48.1% 20.9x 2.8x 10.1x 13.7x
10/19/98 Eastern Enterprises Colonial Gas $426 26.1% 29.9% 26.8% 21.0x 2.5x 10.3x 14.7x
12/22/97 Eastern Enterprises Essex County Gas $117 61.2% 55.5% 26.6% 21.2x 2.4x 9.5x 13.6x
12/18/97 NiSource Inc. Bay State Gas $838 39.1% 32.0% 26.5% 22.5x 2.3x 10.3x 15.8x
12/12/96 ONEOK Western Resources Inc. $661 NM NM NM 32.5x 1.2x 10.8x 18.4x
11/22/96 TECO Energy Lykes Energy $430 NA NA NA 18.8x 2.8x 7.7x 11.4x
8/12/96 Houston Industries NorAm Energy $3,842 47.1% 43.8% 37.6% 25.3x 2.6x 8.2x 11.9x
7/22/96 Atmos Energy United Cities Gas $518 69.7% 64.3% 52.2% 24.8x 2.2x 8.6x 13.0x
4/15/96 Texas Utilities ENSERCH $1,797 NM NM NM NM NM 6.8x 18.6x
_________________________________________________________________________________________________________________________________
(1) Pending Mean 39.5% 35.6% 28.1% 24.2x 2.4x 9.5x 15.0x
(2) Merger terminated on 6/21/99. Median 39.1% 32.0% 26.5% 23.0x 2.5x 9.8x 14.9x
High 69.7% 64.3% 52.2% 32.8x 3.0x 11.6x 20.5x
Low 16.1% 14.5% 15.1% 18.2x 1.2x 6.8x 11.4x
</TABLE>
9
WHAT OTHERS ARE SAYING...
"If the [Columbia] board [of directors] has no regard for its
shareholders, why are they the board? The most important thing for me
is that a Columbia/NiSource deal would be a powerhouse in the industry
as a combined entity. This is a breakdown in what they're supposed to
be doing as board members...[they] need to focus on their shareholders
and their fiduciary responsibility to them, not on the needs of the
board members."
-- Maura Shaughnessy
MFS Investment Management as quoted in GAS DAILY, June 14, 1999
"The bid they put in is a very respectable offer and certainly a
great place to start a negotiation... [NiSource] has been very clear in
their willingness to increase their bid."
-- David Kiefer
Prudential Utility Fund as quoted in THE WASHINGTON POST, June
25, 1999
"The idea that this is an LBO is ridiculous."
-- Robert Rubin
Bear Stearns & Co. as quoted by BLOOMBERG, June 23, 1999
"I think it's a great fit. It would clearly give NiSource the
ability to enhance shareholder value over time."
-- Michael Worms
Gerard Klauer and Mattison Inc. as quoted in PETROLEUM FINANCE
WEEK, June 14, 1999
This newsletter is neither an offer to purchase nor a solicitation of
an offer to sell shares of common stock of Columbia Energy Group. Such
offer is made solely by the Offer to Purchase, dated June 25, 1999,
and the related Letter of Transmittal, and is not being made to, nor
10
will tenders be accepted from or on behalf of, holders of shares of
common stock of Columbia Energy Group in any jurisdiction in which the
making of such offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction
where securities, blue sky or other laws require such offer to be made
by a licensed broker or dealer, such offer shall be deemed to be made
on behalf of NiSource Inc. by Credit Suisse First Boston or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction. The currently scheduled expiration date is August 6,
1999. The Tender Offer may be extended, and any extension will be
publicly announced no later than 9:00 a.m., New York City time, on the
next business day. This newsletter does not constitute a solicitation
of proxies from Columbia Energy Group's stockholders. Any solicitation
of proxies will be made only pursuant to separate proxy materials in
compliance with the requirements of Section 14 (a) of the Securities
Exchange Act of 1934, as amended.
FOR MORE INFORMATION
CALL DENNIS SENCHAK AT
219-647-6085 OR
VISIT NISOURCE
AT WWW.NISOURCE.COM
FOR INFORMATION ABOUT TENDERING SHARES, CALL INNISFREE M&A AT 877-750-
5833
11
EXHIBIT 11(a)(12)
-----------------
[Form of letter dated July 2, 1999 from Gary L. Neale,
Chairman, President and Chief Executive Officer of Parent,
to directors of the Company]
[Letterhead of Gary L. Neale, Chairman,
President and Chief Executive Officer of Parent]
July 2, 1999
Dear :
I am taking this opportunity to write to you today because I think it
is important for me to communicate directly with you regarding a
combination of our two companies.
First, let me state that we believe a friendly merger, which benefits
both companies' shareholders, is still possible. A great deal of time
and analysis has been spent on this proposed merger, and we strongly
believe that the two companies, together, can grow faster and more
profitably than either can separately.
We share many common strategies for growth with Columbia's management
team and would welcome them in the new company. In fact, we need them
to ensure the common strategic plan is carried out.
I have visited personally with shareholders who own more than 50% of
Columbia's stock, and they have expressed strong support for the two
companies negotiating a merger agreement. In fact, your top 330
shareholders, who represent approximately 80% of your outstanding
shares, also own approximately 38% of NiSource. Holders of a majority
of your stock view this potential merger as a powerful combination
that creates one of the strongest regional energy companies in the
nation.
I know you have seen a great deal of analysis from your investment
bankers on value. Enclosed is a comparative listing of mergers in
this industry in the past three years. This information is also
included in the attached communication we are sending regularly to
Columbia shareholders. The numbers are clear $68 a share compares
favorably with the similar transactions over the last three years. We
arrived at the $68 price using similar multipliers that Columbia used
in your CNG offer. Having said that, we will still offer a higher
price to your shareholders if we can sit down and negotiate a
definitive merger agreement.
11
A combination of our two companies will benefit all of Columbia's
stakeholders. We intend to pay full value to Columbia shareholders.
Our credit ratings for the combined company will be strong investment
grade. We will strongly support all communities currently served by
Columbia. We have committed to no layoffs in Columbia's operating
companies, and there is room in this new company for many of the
officers who currently run Columbia business units.
We look forward to working with you and the entire board to create
this exciting, new regional energy company.
Sincerely,
This letter is neither an offer to purchase nor a solicitation of an
offer to sell shares of common stock of Columbia Energy Group. Such
offer is made solely by the Offer to Purchase, dated June 25, 1999,
and the related Letter of Transmittal, and is not being made to, nor
will tenders be accepted from or on behalf of, holders of shares of
common stock of Columbia Energy Group in any jurisdiction in which the
making of such offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdictions
where securities, blue sky or other laws require such offer to be made
by a licensed broker or dealer, such offer shall be deemed to be made
on behalf of NiSource Inc. by Credit Suisse First Boston or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
The currently scheduled expiration date is August 6, 1999. The Tender
Offer may be extended, and any extension will be publicly announced no
later than 9:00 a.m., New York City time, on the next business day.
This letter does not constitute a solicitation of proxies from
Columbia Energy Group's stockholders. Any solicitation of proxies
will be made only pursuant to separate proxy materials in compliance
with the requirements of Section 14 (a) of the Securities Exchange Act
of 1934, as amended.
12
